There are more than billion people getting by on less than a dollar a day in the world. How much better would they be if their incomes rose to, say, $2 a day? The sensible answer -- sitting in a country with an average income of $160 per day – would seem to be $1 per day better off, but this ignores many intangibles that come with extreme poverty – things that don’t make it into national income accounts. Many, perhaps most, of these intangibles are unmeasurable, but not all. Recent research by Abhijit Banerjee and Esther Duflo has shed some light on one that is very easy to understand and measurable – premature death.

In the world’s poorest countries, poor people die early, as Table 1 illustrates for the case of Indonesia. The numbers are shocking. For the best off in the survey sample – those in households whose daily household expenditure per capita valued at purchasing power parity is between four and six dollars a day – the numbers show that of the over-50s that entered the survey in 1993, 7% were dead four years later and 18% seven years later. For those living in the poorest households, the figures were much higher: 15% and 22% respectively.

Table 1: Poverty and death in Indonesia

Sample: People over 50 in 1993 in Indonesian Survey

Fraction dead 4 years later

Fraction dead 7 years later

All

Rural

Urban

All

Rural

Urban

Less than $1/day

15%

15%

18%

22%

21%

28%

Less than $2/day

16%

16%

17%

23%

22%

28%

$2 to $4/day

14%

13%

16%

22%

22%

24%

$4 to $6/day

7%

3%

12%

18%

15%

21%

Source: Banerjee and Duflo (2007), Table 5.

Do the poor die young or are the dying poor?

But what causes what? Does ill health reduce people’s ability to work and thus lower incomes, or is it low incomes that lead to ill health and early death? The relationship between poverty and mortality seems intuitively obvious, and their correlation is well documented. However, isolating the causal relationship is a very difficult and complex task.

Part of the elusiveness stems from the two-way nature of the relationships between poverty and disease, and between poverty and death. Poor people may owe their fate to sickness1 or the early death of a spouse.2 Conversely, they may be sick and/or die because they are poor.3

Third, factors further complicate the analysis. Some authors, often epidemiologists, argue that higher income inequality is associated with increased mortality, at all per capita income levels,4 while most economists attribute correlations between poverty (or other measures of socioeconomic status) and mortality rate to underlying effects of education (Deaton, 2003).5

Theoretical complexity aside, other issues prevent a clear isolation of the relationship between poverty and mortality. First, measurement of variables and the choice of levels of aggregation influence results; second, data availability restricts the degrees of freedom available to researchers.

Missing aged poor people

The Banerjee-Duflo study begins with the puzzling finding that, in nine out of fifteen developing countries in their study, they observe 20% to 35% more old people in a cohort corresponding to slightly better-off old individuals (i.e., defined as those spending $2-$4 or $6 to $10 per capita per day) than in the cohort of extremely poor old people (i.e., $1 per capita per day).

One way to establish whether the poor really die more than the non-poor is to use a panel data set – a longitudinal study – to track the mortality of those identified as poor in the first period. The necessary data exist for Udaipur (India), Indonesia and Vietnam.

The results indicate that mortality is higher for poorer people in all age cohorts, and in all three countries analysed. More interestingly, the largest difference in mortality rates across incomes is consistently found in cohorts of old people. For example, in 1992-93, an Indonesian or Vietnamese aged 50 year-old or more faced a 15% probability of dying within 5 years if he lived in an extremely poor rural household compared to just a 3% to 5% chance if he lived in a rural household with a daily per capita expenditure of $6 to $10.

Mere correlation?

The above results do not constitute evidence of a relationship between adult mortality and income groups, but Banerjee and Duflo perform two additional regressions that yield insights on the direction of causality.

The impression that the correlation is not completely driven by the ‘dying are likely to be poor’ force is strengthened by the fact that when they look at older women in households where there are prime age adults, they continue to find the same pattern. In Vietnam, for example, for women above 50 who live with prime-age adults, the five-year mortality rate goes from 12% among the poor to 7.7%among those with daily per-capita household expenditures of between $6 and $10. Since older women in households with prime-age adults are very unlikely to be engaged in any market work, it is unlikely their household’s poverty is due to their poor health. This makes it less likely that the causation runs from poor health to poverty, though to the extent that poor health is inherited, it could of course be the case that unhealthy old people live with unhealthy younger adults, and this is the reason why the household is poor.

Hence, on balance, Banerjee and Duflo are, in their cautious words, “tempted to interpret the evidence accumulated in our paper as revealing, at least in part, that poverty does kill.”

Weir, David, Robert Willis, and Purvi Sevak. 2000. The Economic Consequences of a Husband’s Death: Evidence from the HRS and AHEAD. Paper prepared for presentation at the Second Annual Joint Conference for the Retirement Research Consortium, “The Outlook for Retirement Income,” May 17-18, 2000 in Washington, DC.

Footnotes

1 Elwan (1999), for example, summarizes the literature on disability and poverty.

2 Weir et al (2000) argue that early widowhood continues to be an important determinant of lifetime poverty risk.